Following Hungary And Ireland, France Is Next To Seize Pension Funds

Tyler Durden's picture

If the recent Hungarian "appropriation" of pension funds, and today's laughable Irish bailout courtesy of domestic pension funds sourcing 20% of the "new" money was not enough to convince the world just how bankrupt the entire European experiment has become, enter France. Financial News explains how France has "seized" €36 billion worth of pension assets: "Asset managers will have the chance to get billions of euros in mandates in the next few months for the €36bn Fonds de Réserve pour les Retraites (FRR), the French reserve pension fund, after the French parliament last week passed a law to use its assets to pay off the debts of France’s welfare system. The assets have been transferred into the state’s social debt sinking fund Cades. The FRR will continue to control the assets, but as a third-party manager on behalf of Cades." FN condemns the action as follows: "The move reflects a willingness by governments to use long-term assets to fill short-term deficits, including Ireland’s announcement last week that it would use the country’s €24bn National Pensions  Reserve Fund “to support the exchequer’s funding programme” and Hungary’s bid to claw $15bn of private pension funds back to the state system." In other words, with the ECB still unwilling to go into full fiat printing overdrive mode, insolvent governments, France most certainly included, are resorting to whatever piggybanks they can find. Hopefully this is not a harbinger of what Tim Geithner plans to do with the trillions in various 401(k) funds on this side of the Atlantic.

More from FN on how first France, and soon every other socalized pension regime, will continue to plunder a nation's life saving to fund short-term deficits:

The decision has prompted a radical restructuring of the FRR’s investments. The new strategic investment plan, which will be released in the new year, will see a rapid reduction in its 40% allocation to equities and a shift to cash and short-term government bonds, according to a source close to the situation.

There will be a focus on liability-driven investment, where asset managers are told to minimise risk by matching assets closely to liabilities.

The transfer of the FRR’s assets to Cades is controversial. Force Ouvrière, a trade union confederation, accused the government of “provoking the clinical death” of the FRR.

The decision was taken within the context of this year’s pension reform, which provoked riots with its decision to raise the retirement age. The state old-age pension system, the Cnav, is in deficit, and responsibility for financing the deficit rests with Cades.

The government is requiring the FRR to pay €2.1bn a year to Cades to meet this obligation.

In other words, pension capital will now be used by perfectly rational third party managers to bid up sovereign bonds. Brilliant.

An asset manager said: “Clearly, the move creates new opportunities, because the French asset management market will be reshuffled because of the changes.

But it is also a step back because there are very few French capitalised pension schemes, and the experience around the FRR, the richness of the asset management and the opportunities it created will disappear in a few years.”

And elsewhere, in the UK, things in the pension arena are also starting to heat up as the country is preparing to launch an "auto enrolment" feature for workers, whereby up to 11 million will be eligible for automatic enrolment.

Trades Union Congress general secretary Brendan Barber hailed it as an “historic advance”: a minimum pension to go with the UK’s minimum wage. Pensions Minister Steve Webb confirmed last month that all employers would have to enrol staff into a company scheme. As a result, up to 11 million people will be eligible for automatic enrolment in a workplace scheme, with up to eight million of them saving for the first time. However, there is little evidence that employers are ready for it.

And judging by the Hungarian, Irish and French case studies, all monies auto deposited will soon find a new mandate: one of bidding up sovereing European bonds. More from Financial News:

Staff can opt out to avoid mandatory contributions that will eventually account for half of the minimum of 8% of salary, with employers contributing 3% of salary, and 1% coming from tax relief.

It is impossible to predict how many people might opt out, but Colin Tipping, head of institutional wholesale at asset manager BlackRock, points to an 80% take-up at US companies that have introduced auto-enrolment compared with less than half of that before the mechanism was introduced. The latest annual review of New Zealand’s national KiwiSaver scheme has an opt-out rate of 18%.

The European experience is less encouraging. Italy tried to boost private pensions saving in 2007 with reforms to the Trattamento di Fine Rapporto, a fund traditionally paid to workers on leaving an employer.

However, its policy of “silent consent”, which had the money transferred into a pension unless workers objected, saw only about a quarter participate. Tito Boeri, director of the country’s social policy reform group Fondazione Rodolfo Debenedetti, said: “It was a great opportunity to develop private pension schemes here, but to a large extent it failed.”

Our only question: how soon before the US administration takes this hint of what every proper socialist country does with funds apportioned to it by a gullible public and ends up investing trillions in the worst possible asset classes (while in Europe this obviously means sovereign bonds, in the US by and far the proceeds will be used to make further purchases of such equities as Apple, Amazon and Netflix, in whose continued successful ponziness lies the fate of a vast majority of US-based hedge funds, whose LPs may at some point, in the distant future, actually pay domestic income tax).

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liberal sodomy's picture

Pensions seized to house and feed brown foreigners and muslims.  That ought to go over well.

Why are the people of londonistan so fond of the word "scheme"?

liberal sodomy's picture

All your junkz is minez, bitchez.

dlmaniac's picture

LOL. Glad I never took those IRA things seriously. Only trusted my own management and took the matter into my own hand. This crap is definitely coming to USA as well. A bankrupted government is like a drowned man willing grab everything for his own survival. Always like that regardless whichever country it is.

shinola's picture

BFD

 

Just how much of the USA's Social Security "trust fund" has "cash" rather than IOU's payable to the current generation from future generations income?

 

Standard Operating Procedure.

 

"Hope I die before I get old..."

 

 

MarketTruth's picture

So-so Security is already running in the red per se and the US Government has been talking about seizing 401k/IRA for a while now. So yes, get out of your 401k starting Jan 1 as that is a new tax year.

Mike7.62's picture

So how does one do that, except through ending his employment and rolling it into an IRA? There are only a few ways to access the money tied up in a 401k. One is mentioned above, the others are for documented hardships involving foreclosure of primary residence or medical treatments exceeding your insurance coverage, and the last is through a loan, which is limited in amount and term.

 

401k's are a money trap with limited availability and use of funds. Their tax benefits are far exceeded by their illiquidity and lack of diversity in investment vehicles. My advice is to use a Roth IRA as a retirement plan, and avoid the 401k altogether. YMMV.

DoChenRollingBearing's picture

Cashing in my IRA (and paying my taxes and penalties) in 2008 looks better and better all the time.

Snidley Whipsnae's picture

Shhhh....beware the clawback provisions that could be included in new US pension confiscation schemes. We did the same but a bit earlier.

I think you posted that you were in S America? That was/is a good move.

This is one long train wreck and we all best stand well clear of the tracks.

 

tomdub_1024's picture

same here, and had the bonus of retiring a bunch o' debt with it.

goldsaver's picture

You read my mind DoChen. My 401k is sitting in my safe as we speak. I do love to take inventory of my shinny every now and then. Its, euphoric.

midtowng's picture

401k's and traditional IRA's are the low-hanging fruit. They will go after them first, once SS is no longer in surplus.

  I'm hoping that my Roth IRA's are safe enough for now, since they are after-tax.

Fearless Rick's picture

I am searching for the post I wrote in 2006-08 advising everybody to cash out their 401Ks and IRAs, but haven't located it yet. I did find this one from August, 2007, interesting, in which I said,

Anybody - and I mean ANYBODY - who is even considering investing in stocks at this juncture ought to be institutionalized. This is the most dangerous market situation since the 1929 crash, and nothing short of an economic miracle is going to prevent a serious, damaging, long-term, worldwide meltdown.

It's worse than you think...


TheGreatPonzi's picture

Americans generally have no idea of what's going on in France, which is still for them the picture of beautiful art, Alizée, fine dining and expensive châteaux.

As a French, I tell you the truth: this country is broke and dirty. What will come in the next years in terms of blowout will make Ireland and Greece pass as a walk in the park.

goldfish1's picture

Hopefully this is not a harbinger of what Tim Geithner plans to do with the trillions in various 401(k) funds on this side of the Atlantic.

Well what the fukk do you think it is then?

Croesus's picture

Goldfish:

The idea has already been floated in the US before:

http://www.sharedprosperity.org/bp204.html

And there's damn reason to think the government won't try for it again. Christ, we run higher levels of debt than anyone, and that represents "easy pickens".

The idea was to replace 401K and similar with "Guaranteed Retirement Accounts", but I think most people realize there's really not much of a guarantee of anything at this point.

High Plains Drifter's picture

Maybe this is why delta force has been charged to seize and control all FED reserve banks in the United States in case of trouble.

StychoKiller's picture

"Trouble" is already here!  Where is Delta Farce?

tahoebumsmith's picture

Keynesian economics in total tail spin. Lets see how its supporters feel now that it is using their money to survive? This is unraveling faster then I expected, let the currency wars begin.

firstdivision's picture

Overnight action is shaping up to be a crackheaded night.  Futures opened up 10 points up now back down. 

fuu's picture

Anyone still in a pension fund at this point is in trouble.

tmosley's picture

Wow.  Cash out those 401Ks and IRAs while you still can folks.

Founders Keeper's picture

[Cash out those 401Ks and IRAs while you still can folks.]---tmosley

I agree. 

Keep a close eye on this lame duck session.

 

Cognitive Dissonance's picture

Hopefully this is not a harbinger of what Tim Geithner plans to do with the trillions in various 401(k) funds on this side of the Atlantic.

We all know that when the financial junkies get desperate enough to consider the unthinkable, the next step is to gather their forces and then storm the police barracks to liberate the property room drug vault and anything else of value. It's only a matter of time.

Double down's picture

Is this the time some one says; "Gold, beatches"

Snidley Whipsnae's picture

I'll bite.... Gold bitchezz.... it's about 8:30 Eastern and gold/silver just began a run down wind. Strong moves in both.

Id fight Gandhi's picture

So banksters get to steal pensions now. Bondholders have no risk.

Where's the outrage?

RKDS's picture

Well, I'll spell it out for you.  Private pensions are pretty much extinct or absorbed by the PBGC, leaving government as the only employer offering such a retirement plan.  Of course, as you can see, everybody hates government employees for some reason or another.  It doesn't matter that we make less money in the public sector (despite the lies parroted by many pundits) or that we just do regular jobs (such as IT or construction) and have no say in the decisions that are killing our country.  Nobody will feel sorry for public employees robbed of their pensions (that they've been forced to pay into for 30+ years) so the predators that be can rape yet another segment of America with complete and utter impunity.  It sucks doubly for those of us that spoke out against stuff like NAFTA because we saw the big picture, but I guess enough "hey, I don't work in a factory, why should I buy American" types will get their comeuppance to satisfy the peoples' thrist for revenge.

liberal sodomy's picture

 "Get out, get your 401k money!" - Glenn Beck 11/15/2010

http://www.youtube.com/watch?v=XV2RnEXuobE

Internet Tough Guy's picture

France just rioted when they tried to raise the retirement age two years. This should go off like a nuke in Paris.

Ignorance is bliss's picture

Cashed out my 401K this year..Will bite the bullet and have purchased Gold and Silver. Fukk it. I will make it based on my best analysis or I will work until I drop. I will not have some punk a-hole Fukk me up. No one cares more about my money and my future than me. Everyone else is looking for their nickel +++ some. I am the one that will suffer or enjoy the consequences. Delegating my responsibilities to someone not as vested is a mistake. There is nothing worse then being stupid in a world that will eat stupid for breakfast.

jeff montanye's picture

tptb can attack pension funds to, at the margin, protect bank senior bondholders from their own execrable investment decisions.  and here can assassinate us by non-litigable executive order.  yet maybe some airport groping over tg may edge us closer to the tipping point.

DonutBoy's picture

Mind-bogglng.  Socialism, a gun to the head. I wonder about my IRA?

midtowng's picture

Is your IRA a traditional one, or a Roth? It's a big difference because one is pre-tax and the latter is post-tax. A pre-tax IRA is no different from a 401k. That's the low-hanging fruit. They will come for that first.

They would have to change the laws dramatically to come for post-tax money, so I'm hoping that we will have some warning if you are sitting on a Roth IRA.

technovelist's picture

There won't be any warning; they will just freeze the accounts while they implement the new rules. That's why I have avoided the Roth bait; I don't believe anything they say.

Belrev's picture

The Social Security "trust" "fund" which is the equivalent of those Euro zone pension funds referred to in the article, has already been spent long time ago. So USA is far ahead of the game in this sense. No?

Id fight Gandhi's picture

Bloomberg says investors wont share bailout costs. Greece loans extended as they won't be able to make their original payment schedule.

Hubbs's picture

Well FDR seized gold at $25/oz, and then later increased valuation to $35 /oz.

PM holders won't get fooled again, so the govt will have to go after the rest of the sheeple who are dumb enough to contribute to and trust in their IRAs and 401ks.

Second verse, same as the first.

 

MyKillK's picture

Seizing the hard earned money of retirees to pay debts incurred by the welfare net which supports the lazy and unemployable.

 

Pretty much sums up what's wrong in this entitlement-gone-crazy world

SmittyinLA's picture

They can pull off that crap in countries with gun control, not America.

GoinFawr's picture

Uh, doesn't seem to have made the slightest difference so far, where the hell you been?

Cawl of Doodee series of vidgames, wherein blasting an avatar meat-puppet with Bernanke's face mapped onto it seems to have been more than enough to dupe the US masses into a practically actionless spineless torpor quite effectively, kiss my sharries.

 You all seem to still operate under the "Dissent is for Weirdos" misapprehension.

Bonne chance with that.

omi's picture

Regarding France, this is nothing new. France has cheated when entering the Eurozone in exactly the same way - they have used the assets in the pension fund to downpay debts to lower gov't debt, and then borrowed again.

Quinvarius's picture

Proving yet again that if it is not buried in the back yard, you don't own it.

PolishHammer's picture

Poland has used their Retirement Reserve Account for current funding in 2010 and is on its way to nationalize private retirement accounts.

So you forgot about Poland

CustomersMan's picture

 

People the world over forget that the various governments or lets say their front-men roll out these decisions as though there is nothing you can do about it.

 

That is only true if you fail to act. There is plenty you can do about the stealing of pensions, etc. and that is to bring the country to a standstill, indefinetely, until your demands are met, all of them in writing and verified by the next government. Act as ONE.

RKDS's picture

You know, there's a word for that, let me think, it's on the tip of my tongue, oh, that's right: a strike, like unions used to do before they become another face of big corporate.  To suggest people form a union to resist a wealthy oppressor is downright herecy in many conservative circles.  I should know, I get dumped on all the time for it.

The sick thing is that John Galt is right in his premise that no man is entitled to another's labor.  That belief is at the very core of both pro-freedom movements and the classical union.  Yet when purportedly pro-freedom conservatives are confronted with the possibility of unionized workers refusing to work for the company's terms, they clamp down with such fury, to the point of declaring that unions should be illegal.  And don't get me started on liberals and their forced collectivisation that cruelly sacrifices many individuals for the benefit of a chosen few.

I ask, doesn't this sound like the company believes it is entitled to labor?  If this true, why bother to pay what are essentially your slaves?  It all seems so transparently lazy, grabby, and dishonest of those who would see fit to pontificate at me about, well, just about anything.